I have been asked a lot recently about Bridging Finance and whether it is still availabe now and what are the different types of Bridging.
Firstly, it can be simple to bridge, even in the current climate and it is usually provided by either:
- Private investors who are cash rich (sometimes referred to as Angel investors)
- Formal bridging company
When dealing with a bridging company or individual note that there are certain FSA requirments, more so for closed bridging.
On that note let me outline the two types of bridging available, these are Closed Bridging and Open Briging.
Closed Bridging
The bridging company have been approved by the FSA to provide short term funding (for one day) – hence the term closed. What this means is that you cannot borrow the money from them for 4 weeks (that would be an Open Bridge). Closed bridges are excellent for doing one day transactions where you need to secure the deal quickly. Also, if there is suffient disoucnt on the propoerty being purchased, the Bridging company will provide bridging on the full agreed purchase price (note that all deals have to be assessed seperately).
These bridge set-ups are ideal for people wanting to look at doing low or potentiall no money down or even cashback property deals. Typical fees will vary from £1500 to £3000+)
One company to look at is: www.simpletobridge.com
Open Bridges
Open bridging enable you to finance the deal for a period of time before looking at re-financing at a higher price. The upside is that you have the property bridged by pridging company; the downside is that it can cost a lot of money to hold it on a daily or monthy basis. The charges may be 2 – 3% per month on the money borrowed. If the investor has not planned for this, it can prove very expensive and profit could be reduced if the open bridge perid runs on.
Typically you will be charged an arrangement fee (similar to above) plus the interest charges.
Of the two, for those who can locate properties at a discount then the closed bridge facility allows you to purchase with very little money in the deal and potentially cash back. CHA CHING!
If you have deals right now that are below market value and you want to minimise the amount you want to put in then visit www.simpletobridge.com and see if they can help you.
